There is one question every business owner must consistently ask: Are we building a company that gives us the freedom to decide what happens next?

That is how we approach every client’s business: Build the company you want to keep forever but could sell tomorrow…one that is valuable, durable, transferable, and controlled by the people who own it.

The process starts at formation.

Formation: The Beginning Influences the End

Formation is more than forming an LLC or incorporating. It is the first opportunity to establish the structure that will determine how ownership, control, capital, intellectual property, and strategy develop as the company grows.

The decisions made at formation influence:

• who owns the company;
• who controls it;
• how ownership can change;
• how new capital can be brought in;
• how employees and partners can participate;
• who owns the company’s intellectual property;
• how major decisions are made; and
• how easily the company can adapt when circumstances change.

Your Business Is an Asset

Like any valuable asset, your company’s value depends not only on what it owns, but on the ability to establish what the company owns, what rights its owners have, and the owners’ ability to exercise and transfer those rights. You should always be able to answer the following about your company and prove on what authority your answers are based:

Who owns the company?

Who controls the company?

What does the company own?

Who owns the intellectual property?

Who else can claim an interest in the company’s assets or profits?

What rights does each owner have and based on what authority?

Can the company take the next step in any direction its owners want to take?

These questions do not replace the work of building the product, winning customers, or creating something valuable. They protect what you build and begin at formation.

When opportunity comes, you do not want to start preparing the company for the next chapter. You want to discover that you have been ready for it since the day the company was formed.

Structure Must Grow with Your Business

A company does not remain the same after formation. You may own your company for thirty years. You may sell it in three. You may raise outside capital. You may bring in a partner. You may acquire another business. You may pass it to your children. You may simply continue operating it exactly as it is. New markets, vendors, customers, IP, employees, locations, buyers, and opportunities you never dreamed of will arise during the lifecycle of your business. You cannot predict which opportunity or challenge will come next, but with an adaptable legal structure in place, you can build your company so that you reliably have actionable options available.

The right structure anticipates your strategy, gives your business room to grow, and creates options, while helping you avoid unnecessary hurdles and pitfalls. The value of optionality is that you do not have to know which option you will eventually choose. You only need to know that you will be capable of choosing when the time comes.